Reliable source says GTS US will be hit hard on the RA which is about to hit. Lists were already submitted. Date keeps getting pushed back - I'm sure leadership is going to play up having to do this because of COVID-19 but this was in the works before the virus became a significant issue. Expect word no later than end of this month - maybe as early as next week. I have heard 30% then I heard 45%. Either way it's big.
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I would also conclude GTS and GBS. Systems (Z, Storage, Power) still pulls revenue and margin. All those wh mentions of ORNL and Summit fighting COVID - that’s Power, and a lot of PR if it actually does more than find suitable compounds. Storage, I dunno how it survived much longer. Krishna has a bad hand in 2020, let’s see how he plays it.
@3ymk I used to work at Accenture. MD’s used to joke about IBM. They knew IBM has no relationships outside of IT organizations. Accenture operates at the C suite. As much as I’d love to see Accenture take over GBS and gut bands 9 and up, because none of them fit the metrics required for those bands at Accenture, it’s more likely that someone in India will sell it to their uncle/cousin/in-law who works at an India pure play.
If put on sale, Accenture would gobble up GBS in no time...
They would dismantle it, plug in working parts and spin off / close the rest...
It'd be an easy way for them to gain marketshare.
What "holding company' will be buy parts of GTS/GBS?
What "company" will acquire parts of GTS/GBS or would IBM spin this off to?
The OP states "I'm sure leadership is going to play up having to do this because of COVID-19"
Why?
They could easily DELAY this due to COVID-19. Every sleazy hedgie and Icahn type will expect every business to report c-ap earnings for Q1 and Q2. IBM has numerous levers enabling them to show humanity and delay this - giving those affected time to help minimize impacts on their employees.
Even that dirtball Zuckerberg is giving all his employees $1,000 each.
Leadership? What Leadership?
Don't expect big plan changes because of this momentary economic downturn. As soon as the virus runs its course the economy will return to normal.
This is all speculation. Nothing more, but a fair reading of the tea leaves says. The deal to sell or divest services (perform) was cooked months ago. No one is going to back out of it. The deal was based on “backlog” and not growth. The going rate for services backlog is 1.5 - 3 X one years billing. IBM has contracts going out 1-5 years so buying the backlog makes a pile of sense for a body shop. Forming a co-op deal with IBM cements that relationship even further. That takes care of the GTS side of the house and the body shop parts of cognitive and GBS. Yes some layoff’s but mostly spinoff. The GBS side of the house is a different story. You can measure utilization rates and thus decide who sits on the bench and who bills. If you are sitting on the bench and don’t have a skill that IBM values (Eg innovate) then you may get laid off. I expect a blending of the two strategies Lay-off and spinoff to incorporate a restructuring charge of approx 15% of IBM’s revenue. Since you have a spinoff/selloff baked in, it doesn’t hurt your quarterly numbers near as bad. One other note from 4th q earnings. Kavanaugh said the restructuring charge (Before) Ginni’s exit stage left was toward the higher end of the last 3 years. That means approx a 1-1.5 billion charge or approx 17-20k of USA/Europe layoff’s. If you apply that charge to India it’s more like 3-4 to 1. My guess is it’s a mix somewhere in the middle. Let’s say 40-60k if Krishna wants to be aggressive (worldwide number) If he then spins off perform (think 75% of what remains in India and 20% of what remains in Europe/USA) you are looking at yet another 40-60k worth of worldwide employees.. That would be an aggressive restructuring of IBM built around the Redhat/Enterprise go to market strategy mentioned via the CFO. AGAIN all just speculation
It just dawned on me (maybe i am slow) that if the plan was to sell off a division or three, will that work now in this depressed global economy? Maybe they could have found buyer(s) a couple months ago but what about now and the rest of 2020? India is going to be slammed just like the rest of the world so the rumored plans to sell there won't work.
So IBM is left holding a now-extremely-expensive bag .. will it now make more sense to just k–l it vs sell it?
A 90/30 package gives them to 3/31 to take the charge this Q and have last day be last day of 2q. Typically announcements have been made on Thu so could be 3/26. Of course there was also spec of a 30/90 so could be anytime but sounds soon.
Hi Folks. Asking if GTS or GBS is going to have a lay-off is like asking is the sky blue. Of course there is going to be an RA. Why do I say that, because revenues are sinking 4-6% a year, and that is the go to method to deal with shrinking revenue. Why else would I say “of course”. Because IBM’s CFO told you he was going to do it. Go listen to the 4th q earnings call. So what else can we speculate on (NOTE I said speculate).
- We have a new CEO, and he only gets one shot to redirect the company. If we don’t see a MAJOR restructuring charge I will be shocked. Gerstner took an 8.9 b dollar charge (approx 15% of revenue). Krishna is no fool. He knows he has to go big. Will he offset some of the bottom line restructuring cost via a spinoff/selloff. LETS hope yes. The big tell here is IBM had 13 lines of Management when Gerstner took over. 7 after he restructured. IBM today has 13 again
- If you are in a perform job and not innovating, your job is going to India, or some other low cost country. Why. Cost. No if’s ands or buts. India runs at 25% all in costs vs Europe or the USA. IBM has watched all of the other major consulting companies adopt this, and they are finally figuring out it has to happen. (that means for all jobs including management and exec’s). Best hope here is IBM structures a co-op type of relationship that binds the low cost provider with IBM. An IBM doing the marketing and the low cost provider doing the servicing would be unique and innovative vs the field.
- IBM will exit all commodity markets. Is storage innovative or commodity? Is Power innovative or commodity. Are perform services innovative, or commodity. If you are not innovative IBM can hire you for less
- IBM will exploit where they have advantage. Enterprise is the target here IBM has enterprise advantage. Expect them to exploit that as much as they can.
- Expect Almost all of the bad news to be announced sooner rather than later. The old adage “get this behind us” is in play right now. IBM knows they are bleeding badly. They need to restructure sooner
This has been in the works for a while. It’s a part of the breakup of GTS, moving some under GBS and selling the rest to a holding company. GTS Europe got their notices out right before coronavirus put everything on pause. GTS UKI will have one in April unless Parliament stops all consultations for layoffs. I know what held up GTS NA from announcing. Bad press. No new business being signed during this time. Expect the cuts to be wider and deeper come summer time. GLTA.
Can absolutely confirm a large GTS US RA was in the works over a month ago.
Dude... watch Netflix or something. Stay away from the keyboard!
Shut up!